In late October 2014, the Australian Competition and Consumer Commission (the ACCC) outlined its intention to focus on ensuring safe products and accurate advertising claims in the cosmetics industry.
During a speech addressing the Cosmetic and Personal Care Conference (organised by the industry representative body Accord Australasia), ACCC Deputy Chair Delia Rickard indicated that the ACCC’s primary focus in this area would be in relation to:
- the mandatory standard for cosmetic ingredient labelling; and
- credence claims made in respect of cosmetic products.1
What is the cosmetic labelling standard?
The Cosmetic Labelling Standard (the Standard) is the mandatory product safety standard for cosmetic products developed in accordance with section 104 of the Australian Consumer Law (the ACL) and published on the ACCC Product Safety website.2 The Standard applies to cosmetic products to be supplied in Australia (whether or not manufactured in Australia). The Standard outlines obligations in respect of ingredient labelling on cosmetic products.
The objectives of the Standard are to assist consumers to identify those key ingredients in cosmetic products to which they may be allergic or sensitive, or otherwise concerned about. The Standard also allows consumers to compare different products at the point of sale.
A failure to comply with the Standard may lead to significant penalties, including a penalty of up to $220,000 for an individual and $1.1 million for a company.
The ACCC’s action plan
Cosmetic complaints accounted for approximately 30 per cent of injuries reported to the ACCC in the past year via the mandatory reporting regime. As a result, the ACCC conducted a number of compliance review activities to determine why the number of reports was so high and also to consider the industry’s compliance with the Standard.
These activities have included:
- a regulatory audit of cosmetic mandatory injury reports;
- completing a number of cosmetic product surveys; and
- the start of a national surveillance program aimed at determining the extent of industry compliance with the Standard.
The regulatory audit and cosmetic product surveys produced a number of results and observations including, interestingly, that Australian-based online sellers recorded no mandatory injury reports during the audit period, despite occupying an increasing proportion of the total sales of cosmetics in the last few years.
More recently, the ACCC has commenced a broader national surveillance program to consider industry compliance with the cosmetic ingredient labelling requirements. This national approach aims to increase compliance with the Standard and enhance consumer confidence in the regulatory system for product safety.
This national program will involve a number of activities including awareness raising activities and a further survey of suppliers of cosmetics (such as major cosmetic retailers, franchise stores (for example, pharmacy chains), smaller retailers, discount variety stores and online suppliers of cosmetic products). The last category that will be surveyed would include direct selling organisations (DSOs).
In particular, the ACCC will focus its attention on cosmetic products which have no ingredient labelling and where the ingredient labelling is in a language other than English. The ACCC has indicated that, where non-compliance with the Standard is identified, it will strongly consider enforcement action.
Marketing and Credence Claims
In addition to the enforcement of the Standard, the ACCC has indicated that cosmetic suppliers should be aware of their obligations under the ACL, for example, their obligations to comply with the consumer guarantee provisions3 that require products to be of acceptable quality and safe and fit for purpose.
Further, the ACCC has indicated that one of the areas of its principal focus for 2014, being its focus on credence claims4, extends to the promotion of cosmetic products.
Credence claims are representations made about the characteristics, attributes or origins of a product. For example, in relation to cosmetic products, credence claims may relate to the presence or absence of an ingredient (e.g. ‘alcohol free’ or ‘all natural ingredients’), product safety (e.g. ‘allergy tested’) or the moral or social benefits of the product (e.g. ‘not tested on animals’).
Under the ACL, any claims or representations made about a consumer product must be accurate and truthful. The ACL prohibits the making of false representations about a product and requires that information provided on a product should not mislead or deceive the consumer.
Accordingly, it is essential that any advertising or marketing materials for a product, including on the labelling of the cosmetic product itself and on a company’s website, do not make any claims that products are of a particular standard or have a particular quality when they do not.
Any claim or representation about the product must have evidence to support the claim.
As with a failure to comply with the Standard, a breach of these provisions may result in a significant penalty of up to $1.1 million.
Cosmetic Industry’s Response
In a statement released by Accord Australasia (Accord) on behalf of its cosmetic industry members, Accord indicated that it was concerned and disappointed with the ACCC’s presentation in the media of the cosmetic industry’s compliance with cosmetic product safety requirements.5
Accord expressed concern that the ACCC’s recent media statements, and in particular the statements suggesting that there were a significant high number of mandatory injury reports relating to cosmetic products, would mislead Australian consumers about cosmetic product safety. It contended that the ACCC’s statements do not reflect commercial reality. Notably, Accord suggests that, based on the large number of product units sold, the number of injury reports constitute only 0.0015% of the product units sold.
Accord has written to the ACCC indicating its eagerness for the cosmetic industry to work further with the ACCC in order to form a better understanding regarding product safety and injury trends.
What can direct selling companies do to ensure they are complaint?
Given the ACCC’s increased interest in the cosmetic industry, it will be important for companies (including direct selling organisations) to ensure that they are compliant. The steps may include:
- being well informed about the obligations and requirements under the ACL generally;
- ensuring that any products (including cosmetic products) sold, supplied and/or delivered to Australian consumers display prominently an accurate ingredients list written in English which can be read without any difficulty and which complies with the Standard;
- for online direct selling businesses who sell their products primarily on the internet - it is good business practice to display the full ingredient list at the point of sale, so that consumers can access the information before or at the time of purchase; and
- ensuring that any representation or claim made to consumers, whether on the product labelling itself or in other marketing materials, is accurate and true and there is evidence to support the claim.